Archive for the ‘Trade Secrets’ Category
If guarded properly, trade secrets are forever. A business may keep the formula to Coca-Cola a secret. However, once it is disclosed to the public, the former secret enters public domain, although an invention using the former secret may still be patentable if it is not barred by statute. Some businesses choose to protect products, processes, and information by guarding them as trade secrets, rather than patenting them. Hershey Foods, Inc., for example, does not patent some of its processes, such as the recipe for Reese's, but rather maintains them as trade secrets, to prevent competitors from easily duplicating or learning from their invention disclosures, or from using the information after the patent lapses. One risk, however, is that anyone may reverse engineer a product and thus discover (and copy and publish) all of its secrets, to the extent they are not covered by other laws (e.g. contract).
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Trade secrets are by definition not disclosed to the world at large. Instead, owners of trade secrets seek to keep their special knowledge out of the hands of competitors through a variety of civil and commercial means, not the least of which is the use of non-disclosure agreements (NDA) and non-compete clauses. In exchange for the opportunity to be employed by the holder of secrets, an employee will sign an agreement not to reveal his or her prospective employer's proprietary information. Often, the employee will also sign over rights to the ownership of own intellectual works produced during the course (or as a condition) of their employment. Violation of the agreement generally carries the possibility of stiff financial penalties. These penalties operate as a disincentive to revealing trade secrets.
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Companies often try to discover one another's trade secrets through lawful methods of reverse engineering on one hand, and potentially unlawful methods including industrial espionage on the other. Acts of industrial espionage are generally illegal in their own right under the relevant governing laws. The importance of that illegality to trade secret law is as follows: if a trade secret is acquired by improper means (a somewhat wider concept than "illegal means" but inclusive of such means), the secret is generally deemed to have been misappropriated. Thus if a trade secret has been acquired via industrial espionage, its acquirer will probably be subject to legal liability for acquiring it improperly. (The holder of the trade secret is nevertheless obliged to protect against such espionage to some degree in order to safeguard the secret. As noted above, under most trade secret regimes, a trade secret is not deemed to exist unless its purported holder takes reasonable steps to maintain its secrecy.)
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To acquire a patent, full information about the method or product has to be supplied to the patent office, and upon publication or issuance, will then be available to all. After expiration of the patent, competitors can copy the method or product legally. The temporary monopoly on the subject matter of the patent is regarded as a quid pro quo for thus disclosing the information to the public. One popular misconception held by many is that trade secret protection is incompatible with patent protection. It is typically said that if you apply for a patent you can no longer maintain a trade secret on the invention, but this is an oversimplification. It is true that in order to obtain a patent you must disclose your invention so that others will be able to both make and use the invention, and, to obtain a patent in the United States, if you have any preferences you must likewise disclose your preferences.
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In the United States, trade secrets are not protected by law in the same manner as trademarks or patents. Specifically, both trademarks and patents are protected under Federal statutes, the Lanham Act and Patent Act, respectively. Trade secrets arise out of state laws. Most states have adopted the Uniform Trade Secrets Act (UTSA). Only Massachusetts, New York, New Jersey, North Carolina, and Texas have not adopted the UTSA. One of the most significant differences between patents and trademarks and trade secrets is that a trade secret is only protected when the secret is not disclosed.
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The sanctioned protection of such type of information from public disclosure is viewed as an important legal aspect by which a society protects its overall economic vitality. A company typically invests money, time and energy into generating information regarding refinements of processes and operations. If competitors had access to the same knowledge, the first company's ability to survive or maintain its market dominance or market position and market share would be impaired. Where trade secrets are recognized, the creator of knowledge regarded as a "trade secret" is entitled to regard such "special knowledge" as intellectual property.
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A company can protect its confidential information through non-compete and non-disclosure contracts with its employees (within the constraints of employment law, including only restraint that is reasonable in geographic and time scope). The law of protection of confidential information effectively allows a perpetual monopoly in secret information - it does not expire as would a patent. The lack of formal protection, however, means that a third party is not prevented from independently duplicating and using the secret information once it is discovered.
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The precise language by which a trade secret is defined varies by jurisdiction (as do the particular types of information that are subject to trade secret protection). However, there are three factors that, although subject to differing interpretations, are common to all such definitions: a trade secret is information that:
is not generally known to the public
confers some sort of economic benefit on its holder (where this benefit must derive specifically from its not being generally known, not just from the value of the information itself)
is the subject of reasonable efforts to maintain its secrecy.
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Companies often try to discover one another's trade secrets through lawful methods of reverse engineering on one hand, and potentially unlawful methods including industrial espionage on the other. Acts of industrial espionage are generally illegal in their own right under the relevant governing laws. The importance of that illegality to trade secret law is as follows: if a trade secret is acquired by improper means (a somewhat wider concept than "illegal means" but inclusive of such means), the secret is generally deemed to have been misappropriated. Thus if a trade secret has been acquired via industrial espionage, its acquirer will probably be subject to legal liability for acquiring it improperly.
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Trade secrets are by definition not disclosed to the world at large. Instead, owners of trade secrets seek to keep their special knowledge out of the hands of competitors through a variety of civil and commercial means, not the least of which is the use of non-disclosure agreements (NDA) and non-compete clauses. In exchange for the opportunity to be employed by the holder of secrets, an employee will sign an agreement not to reveal his or her prospective employer's proprietary information. Often, the employee will also sign over rights to the ownership of own intellectual works produced during the course (or as a condition) of their employment. Violation of the agreement generally carries the possibility of stiff financial penalties.
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